U.S.I. Lowers 2004 Earnings Guidance

By Mark E. Ruquet

NU Online News Service, Dec. 21, 3:24 p.m. EST?Citing the effects of the soft market and other expenses, U.S.I. Holdings Corporation has laid-off about 1 percent of its workforce of 2,500 people and lowered its earnings guidance for 2004.[@@]

After the close of the stock markets yesterday, the Briarcliff Manor, N.Y.-based insurance broker issued a statement saying it lowered its earning guidance for 2004 from $1.02 to $1.07 a share, to 96 cents to 98 cents a share.

The company held an analysts conference call today to discuss the restatement and other actions being taking.

While saying that U.S.I.'s fundamental business plan remains sound, David L. Eslick, chairman, president and chief executive officer, cited the effects of the soft market and overconfidence in the company's ability to attract new business for the restatement of the results.

"We are not pleased with our results and not meeting expectations," he said. "We have had to make some tough decisions to put greater assurance in our future earnings growth and have done so."

The layoffs were made in middle and high-middle management areas, none of which have major client responsibility.

U.S.I. said it plans to dispose of three of the firm's operations that have performed poorly. While not specifically naming the operations, the three were described as either underperforming or not fitting with the character of the insurance brokerage service.

The broker expects to take a charge of $11 million for the layoffs and termination of service and real estate contracts, which will amount to $5 million in savings in 2005. The disposal of the three operations would result in a charge of between $10 million to $13 million in the fourth quarter.

In response to a question during the analyst's conference, Mr. Eslick would not reveal how much investigations of contingency fees by a number of state regulators and states' attorneys general have cost the company but noted "it is significant."

The investigations spring out of a suit filed by New York Attorney General Eliot Spitzer that accused Marsh & McLennan of bid-rigging and other abuses in the placement of insurance contracts with carriers paying profitable volume placement contingency fees.

Mr. Eslick said U.S.I. has adopted more conservative estimating in its budgeting and has taken actions within the past 120 days to strengthen the budget forecasting by its management team.

U.S.I. also announced it has obtained another $80 million in borrowings on its term loan to repay the seller notes related to its acquisition of Summit Global Partners (expected to be completed in the first quarter of 2005) and other operating expenses.

Rating's analyst Standard & Poor's said it is keeping U.S.I. on Credit Watch with a "double-B-minus" rating. S&P said it would keep this current rating until U.S.I.'s part in the contingency fee investigations is resolved as well as the closing of its debt facility.

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U.S.I. Lowers 2004 Earnings Guidance

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